Abstract: Performance Appraisal is the systematic evaluation of the performance of an employee under certain aspects of consideration and to understand the potential of a person for further growth and development of an employee in an organization with specific ratings. This paper presents a design and implementation of a performance appraisal system using the fuzzy logic. It extracts the performance of an employee at each level, thereby generating the ratings automatically with respect to the satisfactory level of the target criteria attained by them. An automated employee rating system based on IBM Lotus Software fuzzy algorithm is used for this purpose to track the employee work performance. The performance will be measured based on certain factors such as Work Achievement, Continual Learning and Communication Skills etc. Based on these attributes, it automatically separates them into five levels of ratings.